Regal Rexnord Q3 2026 Earnings: Data Center Growth Drives Sales Higher

Regal Rexnord (NYSE: RRX) reported Q3 2026 net sales of $1.588 billion, up 6.1% from $1.497 billion, while GAAP diluted EPS swung to a loss of $0.19 from earnings of $1.20. Adjusted diluted EPS increased to $2.90 from $2.51, but the GAAP result included a $119.3 million noncash goodwill impairment. Growth was concentrated in Automation & Motion Control, supported by a 307% increase in data center sales.

Core Financial Results

Sales increased by $91.0 million in the quarter ended September 30, with Automation & Motion Control providing most of the growth. Daily orders rose 6%, while orders excluding data centers increased 13%.

The goodwill impairment caused operating income and GAAP EPS to decline despite higher sales. On an adjusted basis, EBITDA increased 3.5% and EPS rose about 15.5%, although the reported adjusted results benefited from IEEPA tariff refunds.

Calculated changes are approximate. Adjusted EBITDA included a $14.7 million net benefit from IEEPA tariff refunds, while adjusted EPS included a $0.18 benefit.

Business and Segment Performance

Automation & Motion Control was the principal growth engine, led by data centers and discrete automation. The other two segments were comparatively subdued: Industrial Powertrain Solutions contracted, while Power Efficiency Solutions posted limited organic growth.

Data center sales increased 307%, or 169% excluding E-Pods. Automation & Motion Control recorded $25 million of E-Pod sales, while discrete automation also contributed to the segment’s growth. Its adjusted EBITDA rose to $96.0 million from $82.6 million, but the margin declined by 130 basis points.

Industrial Powertrain Solutions was affected by weakness in metals and mining, partly offset by discrete automation and energy markets. Adjusted EBITDA fell to $169.0 million from $174.6 million.

Power Efficiency Solutions benefited from commercial HVAC growth, but residential HVAC and pool demand remained weak. Adjusted EBITDA increased to $86.3 million from $82.2 million, and the segment’s margin improved by 70 basis points.

Profitability, Cash Flow, and Balance Sheet

Adjusted gross margin was 37.7%, compared with 37.6% a year earlier, while adjusted operating margin increased to 13.8% from 13.5%. These measures indicate that adjusted operating profitability remained relatively stable even though the reported operating margin fell sharply because of the impairment.

Quarterly operating cash flow increased to $219.8 million from $197.5 million. After $26.1 million of capital expenditures, free cash flow reached $193.7 million. The quarterly improvement contrasts with the first nine months, when operating cash flow fell to $411.4 million from $823.0 million; the cash flow statement shows a particularly large year-over-year difference in receivables and other operating assets and liabilities.

Regal Rexnord ended the quarter with $4.452 billion of gross debt and $4.001 billion of net debt. Net debt was 2.96 times trailing adjusted EBITDA, or 2.92 times when expected synergies were included. Long-term debt declined to $4.428 billion from $4.765 billion at the end of 2025, while cash and cash equivalents on the balance sheet were $449.6 million.

A Goodwill Charge Drove the GAAP Loss While Tariff Refunds Lifted Adjusted Results

The $119.3 million goodwill impairment, primarily associated with the autonomous mobile solutions business, reduced diluted EPS by $1.78. Because the charge was noncash, it lowered reported earnings without directly reducing quarterly operating cash flow. It also caused Automation & Motion Control to report a GAAP operating loss of $81.3 million even though the segment generated $46.7 million of adjusted operating income.

The adjusted figures require a separate qualification. Reported adjusted EBITDA of $351.3 million included $14.7 million of tariff-refund benefits. Excluding those refunds, adjusted EBITDA was approximately $337 million—roughly in line with the prior-year figure of $339.4 million rather than showing reported growth. The company’s full-year adjusted EPS guidance also includes a $0.58 benefit from IEEPA tariff refunds.

The impairment coincides with Regal Rexnord’s broader portfolio review and its decision to explore a sale of the autonomous mobile solutions business. No definitive transaction was announced.

2026 Guidance

Regal Rexnord lowered and narrowed its GAAP EPS guidance while raising and narrowing its adjusted EPS range. The divergence primarily reflects the impairment excluded from adjusted results, together with other specified adjustments.

GAAP guidance includes the $1.78-per-share goodwill impairment, while adjusted EPS guidance includes $0.58 per share of net IEEPA tariff-refund benefits.

Management’s View

CEO Aamir Paul highlighted broad order growth outside data centers. Commercial HVAC orders increased 47%, aided by new air-moving solutions, while discrete automation orders rose 26%. Management also noted that data center orders were affected by the timing of specific projects, making quarterly order patterns an important factor to monitor.

Paul said the company is reviewing its portfolio with the board and outside advisers, with the goal of directing capital toward its most attractive opportunities. Exploring a sale of the autonomous mobile solutions business is the first disclosed action associated with that review.

Recent Insider Transactions

The source data show 79,085 shares classified as insider purchases across 34 transactions during the previous six months, compared with 39,865 shares of sales across five transactions. That produced a reported net purchase of 39,220 shares; however, the latest transactions include multiple stock awards rather than open-market purchases.

Nine of the ten latest reported transactions were stock awards, while one was a sale. These transactions do not by themselves establish insiders’ views on the company’s outlook.

Risks Investors Should Watch

• Data center project timing: Data center sales are growing rapidly, but management noted timing effects for specific orders. This could produce uneven quarterly growth even if underlying demand remains intact.
• Portfolio and impairment risk: The $119.3 million impairment and potential sale of autonomous mobile solutions indicate pressure within that business. The outcome and financial effects of the portfolio review remain unresolved.
• Weakness in selected end markets: Metals and mining weighed on Industrial Powertrain Solutions, while residential HVAC and pool markets constrained Power Efficiency Solutions.
• Dependence on tariff-refund benefits: IEEPA refunds increased quarterly adjusted EBITDA by $14.7 million and adjusted EPS by $0.18, making reported adjusted growth stronger than the result excluding those benefits.
• Debt and cash conversion: Net debt remained at $4.001 billion, and nine-month operating cash flow declined materially from the prior year despite an improved third quarter.

Summary

Regal Rexnord’s Q3 2026 sales growth was led by data centers and discrete automation within Automation & Motion Control, while its other segments delivered limited or negative growth. Adjusted EPS and quarterly free cash flow improved, but the GAAP loss reflected a major goodwill impairment and adjusted EBITDA benefited from tariff refunds. The main items to monitor are data center order timing, the autonomous mobile solutions review, end-market weakness, cash conversion, and progress in reducing leverage.